Financial Times
January 25, 2012
When a Greek bond first yielded 100 per cent, in September, the shock value was almost lost amid the global gloom. Now the yield on its March bond is 1,100 per cent, and on Wednesday morning rose 100 percentage points.
It might be the only bond (outside hyperinflation) to offer more than 1,000 per cent. It is a multiple of what Russian or Argentine bonds yielded before their defaults.
Still, it is little more than symbolic. The bonds have long priced in default, with the only question being how bad it is.
Yet, the soaring Greek yields matter to investors elsewhere, as they reflect the stalling of talks over “voluntary” default.
Eurozone leaders have repeatedly insisted Greece is a special case. Since previous pledges of no Greek default were bunkum, it should be no surprise that Greece is instead being treated as a model for the rest of the periphery.
It is not a pleasant prospect. The implied terms of Greek bonds keep changing. Initially this was in their favour, when bilateral loans to Greece from eurozone governments were extended and interest rates cut. Now it is going against private investors, with no suggestion that bilateral loans will take part in a default, even though they were supposed to be ranked equally with bonds.
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